Copper Edged Higher As Chile’s Supply Risks Grew

SEATTLE (Scrap Monster): Copper prices edged higher after two fresh disruptions in Chile – a fatal landslide that partially halted work at Codelco’s El Teniente mine and a continuing strike at Antofagasta’s Centinela – kept traders focused on near-term supply risk.

What does this mean?

Chile is the world’s biggest copper supplier, so even short interruptions can tighten a market that runs on steady mine output. Codelco, Chile’s state-owned miner, said it partly suspended El Teniente after the landslide, while talks over the Centinela walkout are set to resume under a voluntary mediation process. That’s showing up in a key demand-and-supply gauge in China: the Yangshan copper premium, which is the extra cost to secure imported copper into China’s bonded (duty-deferred) warehouses, jumped to $135 a metric ton last week – the highest in four years. At the same time, Shanghai Futures Exchange (SHFE)-tracked inventories rose 51.6% since end-September to 58,744 tonnes, a reminder that “stocks up” can simply mean more metal has arrived or been parked for financing, not that buyers are suddenly less interested.

Why should I care?

When the import premium spikes, it signals that physical buyers in China are bidding aggressively for deliverable copper, pulling cargoes toward the country through the import-arbitrage channel. Exchange inventories can still rise in that environment because metal often hits warehouses first, before it’s used. So the market’s stress point tends to move from the headline price to “nearby spreads” – the price gap between contracts that deliver soon versus later – which can swing more sharply as traders reprice immediate availability. That makes both LME and SHFE front-end pricing more sensitive to any new mine headlines.

Courtesy: www.finimize.com